It isn't the quality of assets...it's the leverage issue. Otherwise, I would own high quality mortgages at a 32 debt to 1 equity ratio like those merry guys at Carlyle. Too bad the general public is cannon fodder in this slamdance.

2:00 pm March 7, 2008

Anonymous wrote :

How do I buy some undervalued assets, without getting wrapped up in an overleveraged corporation?

2:01 pm March 7, 2008

Its the banks wrote :

Problem is tha banks that have lent money to Thornburg and others are also exposed to mortgage firms holding crappy notes. They are seizing good assets to cover their butts on their crappy investments. We did our due diligence on Thornburg when we should have been doing due diligence on the the likes of JP Morgan.

2:11 pm March 7, 2008

rob roy in florida wrote :

I hope there is a place in hell for those rapacious bankers who are slaughtering Thornburg through an accounting practice which is not tempered by judgement.This is nothing short of greed and the individual shareholders like me are being victimized by this practice.It is like the public is watchinf a rape in progress and doing nothing.This kind of injustice should not be tolerated by our elected officials.But as ususal they have a blind eye and cold heart.Hell is too good for the bankers and the lawmakers
who allow this to happen .

2:48 pm March 7, 2008

The Epicurean Dealmaker wrote :

Ah, I see MarketBeat is another devotee of the great man's pithy aphorisms.

Is the market being irrational in the sense of being unable to differentiate among assets that appear to be different right now? Very possibly.
Is the market being irrational in the sense of market participants acting against their own self-interest? I suspect not.
The issue is trust and reliability. Some much of the information concerning structured financial vehicles has already proven to be false that there is a fair amount of rationality to saying "I refuse to bet any money on the veracity of what I am being told now".
The damage that has been done by those in charge of the US money supply for the past few years (i.e. credit creators) is very deep. More even than the visible financial destruction is the ruining of the complex and delicate network of trust that made advanced capital allocation possible.

3:04 pm March 7, 2008

Anonymous wrote :

Hey Bernanke, How are those interest rate cuts working out?

5:26 am March 8, 2008

poor man, broke man wrote :

Greed, is the cause of this sitution. Everyone but the little guy, prospers. It is still going to be a bumpy road. As the judge said "May God have mercy on yoy soul."

11:17 am March 8, 2008

Little Guy wrote :

Wow, what a terrible tale. I loved Thornburg but was forced to sell on stop losses last year. Too bad that a bunch of top flight managers and their shareholders got screwed by the sloppy big bureacratic banks.

1:09 pm March 8, 2008

Moneysage wrote :

Liquidity Trap Just Over the Horizon?
----------------------------------
more at http://money-sage.com
----------------------------------

We are most certainly NOT PREDICTING A LIQUIDITY TRAP over the horizon. However, we DO NOT RULE IT OUT BY ANY MEANS.

Since virtually the entire "surge" in inflation derives from the exponential increase in commodity prices, and the very limited feed-through of such prices, and since such "inflation" is UNSUPPORTED by that which is necessary to render it durable -- viz., an expansion of OPERATIONALIZED LIQUIDITY -- we must perforce pose the question: what would occur should a sudden and sharp drop in commodity prices occur? Or, to put the matter even more starkly, what would the implications be for a bear market in commodity prices? (Oh, how we love to think about the "unthinkable." Reason: the unthinkable happens with sufficient frequency to ruin millions).

There is a large body of Wall Street, media, and popular opinion that the commodities boom is now a perennial and irreversible factor in the global economic equation. We would respectfully demur. For one thing -- and this alone, to us, is more than sufficient to discredit the above-mentioned thesis -- we have heard all this before, and it is NEVER TRUE. All price trends in due course reverse, as the inevitable, human nature based processes of exponentially rising greed, financed by ever-more leverage, drives prices so far beyond their fundamental, supportable levels that initial sales by the smartest speculators invariably mark a peak and begin the downward cascade. We find no reason to believe that the current commodities bull market is any different. Indeed, we would note that commodity price trends TYPICALLY culminate in gross extremes, which are invariably followed by price plunges and then protracted bear markets.

Apart from this, a fairly routine analysis of the mainsprings of the current commodity boom suggest the deep vulnerabilities of same, and the significant prospects for a shattering reversal.

What, after all, is the source of this explosion in commodity prices, we would ask somewhat rhetorically? The answer is China. And, India. And, other rapidly growing Asian, and even eastern European and Russian and Latin American economies. These countries, as the commodities bulls have correctly observed, do indeed contain huge populations. The folk inhabiting these countries do indeed wish to graduate to an American-type lifestyle. To which our rejoinder is: so what?

We all wish to be multi-millionaires. Very nice. But, as in the above-mentioned case, we ask: so what? The desire, and the ability to translate the desire into realized reality, are two DISTINCTLY DIFFERENT THINGS. After all, you can only acquire what you can buy -- or steal. And you can only buy what you have money for, or can borrow money for.

Now, in the case of Chindia and the other newly "emergent" economies, money is acquired by two means: producing goods and services CHEAP and exporting them to consumers overseas, PARTICULARLY IN THE UNITED STATES -- and attracting investment and speculative money eager to cash in on the presumed future growth prospects of the emergent economies. What happens when the American consumer is no longer able to finance purchases from abroad on anything like the level of the past? What happens in the event, not of a brief American recession, but in the event of a long-term deflation in consumer wealth, borrowing power, and spending? What happens as the American "developments" shall we say, affect the economies and the psychology of other major consumer-dominated importing countries: Japan (which already has a depression mindset) and western Europe, now being set up for a fall by crumbling, over-leveraged real estate markets and dangerously over-extended banks?

What happens is that the income flows to Chindia and other emergents is reduced sharply; this contraction will likely reduce sharply the asset accumulation and wealth production of these countries, with major impact on infrastructure spending, manufacturing expansion, and energy consumption. Moreover, the progressive destruction of capital in the United States and in other finance-dominated western economies will lead to a significant REDUCTION in capital inflows to China and elsewhere. This will be a function, quite simply, of the loss of capital here and elsewhere. There simply will not EXIST that much capital any more for long-term investment in Chindia and in other emergents.

Against this backdrop, a decline in demand for commodites (with the possible exception of oil) will likely lead to price declines. Once prices start declining, losses will start to multiply among highly leveraged speculators, much as is currently occurring among leveraged speculators in mortgage-backed bonds. The familiar -- and INEVITABLE -- process of decline in collateral values, rise in margin calls, dumping of commodities, further price declines, further collateral value declines, further margin calls will then be in train. Since the price decline has as its starting price a level so deep into bubble territory it is difficult to plumb, and since the indispensable support for this bubble is the mountain of debt financing this speculation, a subsequent vicious, mutually reinforcing downward spiral does not require an excess of imagination to envision.

Commodity prices rise swiftly; their fall is much swifter. This, of course, is a law of financial markets, but has an historically repetitive rhythm when it comes to commodities.

Once the ostensible inflationary impact of commodity prices is REPLACED with plunging commodity prices, there will no longer be any OFFSET to the predominant DEFLATIONARY forces operating on the financial system and the economy in this country. Prices, we would suggest, COULD then start FALLING, rather than RISING. We could then find ourselves confronting a COMPLETELY UNEXPECTED PHENOMENON: DEFLATION.

In this context, the PRESENT LEVEL OF INTEREST RATES, WHICH IS NOW CLOSE TO NEGATIVE, COULD BECOME STRONGLY POSITIVE. MOREOVER, AS INFLATION TURNED INTO DEFLATION THE FED MIGHT NOT HAVE ENOUGH TIME TO REDUCE SHORT RATES TO ZERO. In this case, the FED would be barred from producing the REAL NEGATIVE RATES necessary to prevent a general deflation, with its inevitably depressionary aspect. In other words, we would find ourselves caught in precisely the same situation in which Japan has been mired for nearly twenty years, and in which the American economy found itself in the 1930s: we would be in a LIQUIDITY TRAP.

3:43 pm March 8, 2008

Yep! wrote :

Sending letters to Congress is difficult these days. Many Congressional representatives will not accept letters or emails except from their district. Then, they are not supposed to be involved with litigation. The Supreme Court wrote that they don’t have authority to appoint a special prosecutor. I am going to try to have the S.C. send a referral to the USDOJ for prosecution of witness intimidation and what I am almost positive is a violation of the Hobbs Act.http://www.usdoj.gov/usao/eousa/foia_reading_room/usam/title9/crm02403.htm

Comment by Kay Sieverding - March 8, 2008 at 2:46 pm
Kay,
Good job, I wish we had more Lawyers of your stature on board!
Thank you,
The OZ

Comment by We need more... "we the people like this one"! - March 8, 2008 at 3:36 pm

3:53 pm March 8, 2008

Moneysage, "we the people"... need your help! wrote :

Moneysage,
Another great article and I agree 110%. Can you help us... "we the people"... out and transcribe a draft that "we the people" can e-mail on blog sites here on WSJ and other blog sites around the world to our Government Leaders as a blanket letter with a directive (simple solution) of what "we the people" would require our Government to do as a 1st step (Contract between “we the people”… and our Government)? Our time window for this request is fading fast now if something is not done and done very quickly now?
~
Thanks,
The OZ

6:25 pm March 8, 2008

It's hopeless..."we the people", are dead! wrote :

The Constitution of the country begins with the preamble:
“We the people of the United States, in order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for a common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the united States of America.”
- and then continues to prescribe a country with a government having only limited powers in order to maximize liberty and freedom of its citizens.
Yet you would not believe that today if you take time to consider all of the things in our lives that are controlled by the federal government, despite the original intention of those writing our Constitution to actually limit the power and authority of the government.
Messrs. James Madison et al had the right idea in their belief that government power would get out of hand and become all encompassing unless expressly restrained. Unfortunately all three branches of the government, including the U.S. Supreme Court, have too often expanded the authority of the federal government well beyond the original intention. This has occurred for several reasons.
Many among us believe that we, the people of the country, are better off if the government is empowered to ‘take care of us’, The motivation of these people may be well intentioned but is nevertheless devastating to our freedom and generally outside the scope of the Constitution.
Another group of people are less well intentioned. They are true power seekers who will do and say anything to get and retain power. Perhaps in times past they were labeled differently but in these times they are primarily leftists and Democrats.

Although it may be that Democrats of decades ago were of a different mind, today most adherents of the Democrat Party, and especially those in leadership roles, clearly seek power for powers’ sake and to inflict their view of the world on the rest of us. For the most part they seek to control our lives through governmental action, of course in accordance with their version of ‘what’s best for us’ because they think we are incapable of deciding that question for ourselves. Most commonly this power is derived by making as many people as possible dependent upon government.
In so doing, a large segment of the population becomes ‘disincentivised’ to make any significant effort to help themselves and they become increasingly reliant upon government for their quality of life. It also makes them blindly supportive of those that advocate government assistance to them; hence, they vote to keep these people in power and against those who want them to try to help them help themselves and become more self-reliant. Whether they know it or not (or whether they care or not), the cost of this is great; loss or diminishment of their liberty and freedom. Unfortunately for the rest of us, their cost is also our cost.
If you find it difficult to believe we started out with a limited federal government, consider what the Constitution actually proscribes as the powers of the federal government, all other powers being retained by the states or the people (the 10th Amendment).
Michael Mitchell of Alaska compiled this list from Article I of the U.S. Constitution. These are all the powers that the Congress has.
Borrow money
Regulate commerce among the states
Regulate naturalization
Regulate bankruptcies
Coin money
Fix weights and standards
Punish counterfeiters
Establish post offices
Establish post roads
Record patents
Protect copyrights
Create federal courts
Punish pirates
Declare war
Raise an army
Provide a navy
Call up the militia
Organize the militia
Makes laws for Washington, DC
Make rules for the Army and Navy

And that’s it! According to the 10th Amendment, all other powers are “reserved to the States, respectively, or to the people.” The additional power ceded to the federal government has been by fiat by congress itself with the concurrence of the Judicial and Executive branches of government. Simple clauses of the Constitution such as the power to “regulate commerce among the states” have been interpreted so broadly as to enable Congress to regulate portions of our lives well beyond the original intention of our country’s founders.
Take a look again at the “enumerated powers” above and consider for yourself in how many ways congress has exceeded the authority granted by the Constitution; how many can you think of? That is the reason it is very important to have federal judges and Justices on the U.S. Supreme Court that will abide by the constitution and not make ‘laws from the bench’ in accordance with their concept of ‘what is good for you’; and the reason we must elect a president who will appoint judges who will take their oath to defend and preserve the constitution seriously (and in these days senators who will “advise and consent” with such appointments).
The OZ

Comment by It's hopeless..."we the people", is dead! - March 8, 2008 at 6:18 pm

8:09 pm March 8, 2008

Warren Huang wrote :

The irrational markets sentiment are caused by continued housing market slump
resulted credit crisis, as
this will continue into to summer, we should expect this
sentiment stay till then.
REIT investment facing continued trouble, bear rally
shares buy back will drag the
share price to new lowhttp://www.osawh.com/fund2008.htmhttp://www.osawh.com/mortdefa.htm

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